Advantages of Spread Betting Explained

Online Spread Betting

Advantages spread betting - online spread betting

There are many advantages of spread betting that offers benefits over traditional stock broker accounts. Many traders tend to shy away from this as a means of trading or investing, but it can offer a useful alternative to traditional trading when it is fully understood.

Online Spread Betting gives individuals very convenient means of trading and investing in a very wide range of markets, many of which that were once beyond the scope of the average investor.

Spread trading online offers an extremely versatile means of trading and you do not have to be an experienced trader to do it, but there are a number of advantages and associated risks that traders should be aware of before starting out, and these are explained here.

Summary of the key advantages of spread betting

  • Tax free trading  **Tax Law can change and may differ in other jurisdictions outside the UK
  • No commission or brokers fees
  • Go long or short
  • Hedge your portfolio against falling markets
  • Trade online or by telephone
  • Mobile dealing
  • 24 hr trading
  • Wide range of markets available from one account
  • Trade on margin
  • Small stakes
  • Automated stop losses and limit orders
  • Practice trading accounts
  • Trade in your currency
  • Regulated by the FSA 

Risk Warning

Spread betting carries a high level of risk to your capital and you may lose more than your initial investment. It may not be suitable for all investors. Only speculate with money that you can afford to lose. Please ensure you fully understand the risks involved and seek independent financial advice where necessary.
advantages of spread bettingLearn more about the advantages of spread betting and apply online for an account at Capital Spreads  Capital Spreads is a division of London Capital Group, authorized and regulated in the UK by the FCA .

Advantages of spread betting explained

Tax free trading**

One of the key advatages of spread betting in the UK is that profits from financial spread betting are free from capital gains and income tax, and since you you only take a position on whether a market will rise or fall and you do not actually purchase the underlying assets - there is no stamp duty to pay.

**Tax Law can change and may differ in other jurisdictions outside the UK

No commission or brokers fees

Financial spread betting companies make their profits from the spreads  (the difference between the buy and sell prices). That means there are no dealing costs or brokers fees to pay on trades. Coupled with the benefits of tax free trading**, this can amount to a substantial saving over traditional stock broker dealing and in many cases, could be the difference between making a profit or a loss.

Go long or short

Another one of the main advantages of spread betting is the ability to short (sell) the market. This makes it possible for you to profit from the stock markets whether they are rising or falling.

Hedge your portfolio against falling markets

Many investors use financial spread betting as a means of hedging their portfolios. You may have a stock holding that you have as a long term investment and is falling in value in the short term but you do not want to sell it, It is possible to counter balance the decrease in value of your shares by selling the equivalent value of your holding through online spread betting. 

Trade online or by telephone

In addition to a traditional telephone dealing service, online spread betting offers a very convenient option for traders because you can have full access to your trading account and have the flexibility to fine tune your timing so that you can get the best prices to open or close trades. Set or adjust orders and stop loss levels at your convenience and access trading history. 

Mobile dealing

Trade where ever you are. In addition to a traditional telephone dealing service and online platform, most spread betting companies now offer the convenience of a mobile trading platform.

Trade on margin

Margin is 'leverage' or 'gearing' - Financial spread betting is a margined product and means you are only required to deposit a proportion of the full value of the transaction.

This frees up capital to be invested elsewhere but it is important to be aware that trading on margin can be very risky. In the same way that profits can be enhanced proportionately due to the gearing, losses will also be magnified  when the markets move against you and it is possible to lose more that your initial stake.

More advantages of spread betting

Wide range of markets available from one account

Another of the key advantages of spread betting - Trade in world indexes, individual stocks, commodities, currency,  bonds, options, binaries etc... all from one account. Spread betting forex and indices is becoming one of the most popular ways of trading in the financial markets.

24 hr trading

Where ever you want and now when ever you want. Many spread betting companies now offer 24 hr dealing so you can now take advantage of the price action out of normal hours and no longer have to wait till the markets open, by which time quotes may have moved substantially.

Small stakes

Trade from £1-2 per point. It is possible to trade in small stakes and a £1 per point trade on a stock is the equivalent of buying 100 shares. It can be more cost effective to trade through online spread betting if you want to trade in smaller stakes as costs are kept at a minimum due to the gearing and and the fact that there are no dealing costs or taxes** to pay .

Automated stop losses and limit orders

limit your risks and maximize profits by setting automated stop loss or limit orders that will trigger when the order price level gets hit. Some companies offer guaranteed stop losses for a small premium.

Practice trading accounts

Learn online spread betting - Practice your trading skills risk free by paper trading through a demo account until you are ready to commit hard cash. Most spread betting companies offer demo accounts for paper trading so that you can try spread betting risk free.

Trade in your preferred currency

Avoid costly exchange rates. Some spread betting companies can offer accounts in a range of currencies so that you can choose to deal in the currency of your choice from the available options.

Regulated by the FCA

Financial spread betting companies clients in the UK have the peace of mind in knowing that the industry is regulated there by the Financial Conduct Authority, so they can be sure that they are dealing with a reputable company.

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